ECONOMY – Jewish Voice From Germanyhttp://jewish-voice-from-germany.de/cms
Die englischsprachige Brücke zwischen Deutschland und den Juden in aller WeltFri, 04 Jan 2019 17:08:27 +0000en-UShourly1https://wordpress.org/?v=4.5.16Decline and Way Outhttp://jewish-voice-from-germany.de/cms/decline-and-way-out/
Fri, 05 Oct 2018 13:10:55 +0000http://jewish-voice-from-germany.de/cms/?p=7689Concentrating on the traditional business of financing corporations which operate internationally will lead German banks out of their current crisis…

What’s going on with Germany’s big banks? Ten years after the global financial crisis the country’s two leading lenders are in worse shape than ever. On the international stage, in their profitability and market valuation, Deutsche Bank and Commerzbank now play only a marginal role. Chaos in management and strategy, incessant scandals, nose-diving share prices and now, even the exit from Germany’s blue chip index have all accompanied the former heavyweights’ downfall.
While Germany’s economy keeps growing at a healthy clip and the country remains Europe’s political and economic locomotive, its banks – i.e. the backbone of the economy – are caught lagging behind. As a European banking market slowly takes shape and the EU moves ahead with plans for a banking union, the German players watch from the sidelines, too preoccupied with their own problems.

Policymakers in Berlin worry that the two banks will become mere pawns in the looming consolidation of Europe’s banking sector instead of helping shape the transformations. A brief look at market valuation reveals the gulf between the German, French and Spanish lenders. Both France’s BNP Paribas and Spain’s Santander have market capitalizations exceeding 70 billion euros, which is three and a half times that of Deutsche Bank. Even numbers two and three in France can easily take on Commerzbank (market cap 10 billion euros).

Widening gulf

The gap with US banks is far wider. “Since 2012 the profits of American banks have been at least double those of their European counterparts,” says a recent report by consultants Ernst & Young. And the gulf, it adds, is widening. US banks got back on their feet quickly following the financial crisis and forced capitalization by the government. Currently they are benefiting from the booming domestic economy and Donald Trump’s tax reform. While interest rates at historic lows continue to depress revenues in the Eurozone, the Federal Reserve began raising US rates long ago, ensuring a more amenable banking environment.
At the Frankfurt bank summit, German Finance Minister Olaf Scholz expressed the government’s wish for a big and strong German bank that can accompany the country’s booming exports abroad. With this in mind, the possibility of merging Deutsche Bank and Commerzbank has repeatedly been considered. But both lenders’ CEOs consider such plans illusory, at least in the shorter term. Christian Sewing and Martin Zielke instead point to the unfinished business of restructuring both businesses. A hurried merger would resemble an emergency operation with an uncertain outcome.
The reasons for the decline of Germany’s once-proud lenders do not lie only in the 2008 financial crisis. They were primarily homemade: mismanagement, chaos at the top, loss of trust. For Deutsche Bank things began to sour when Germany’s then-flagship lender joined the free-for-all adventure of investment banking. With the takeover of US investment bank Bankers Trust, then considered the bad boy of Wall Street, the heretofore antiquated Deutsch-bankers set themselves a challenge they would not rise to. Two worlds collided in the process. Bankers Trust epitomized the brash new Wall Street approach to moving markets, while Frankfurt remained the domain of pinstriped banking with private customers and lending to midmarket companies and prosperous industries. The outcome of this Kulturkampf is well known: The investment bankers won the upper hand and made the lender their cash cow. CEOs Hilmar Kopper, Rolf Breuer and Josef Ackermann failed to rein the investment bankers in. Tasked with rolling out a new beginning at Deutsche, the following chief executive tandem of Jürgen Fitschen and Anshu Jain, installed by still-serving supervisory board chair Paul Achleitner, could not implement a new culture at the lender.

A shoe that does not fit

In 2015, despite the bank posting billions in losses, it also paid out 2.4 billion euros in bonuses. Billions more in write-offs and massive legal costs for its scandals followed. Deutsche Bank is an illuminating case study of what happens when a company hurriedly adopts an Anglo-Saxon business model that does not fit, writes economic historian Werner Abelshauser. Now, Deutsche Bank is caught in a strategic trap: Investment banking, which once guaranteed high profits, no longer works. And in retail and corporate banking, Deutsche does not have the necessary size.
Germany’s other big private sector bank offers a similarly bleak picture. Commerzbank had to be rescued from oblivion with billions of taxpayer euros in late 2008. Its takeover of Dresdner Bank shortly before Lehman Bros collapsed proved disastrous for Commerzbank. Several subsequent changes in strategy have since cost the bank its very identity.

One handicap against international competition is Germany’s splintered banking market. While the country’s consumers benefit from the intense competition by paying less for financial services than their European neighbors do, the banks themselves are saddled with inadequate market share and profit margins. France’s five biggest banks, including BNP Paribas, Societé Générale and Crédit Agricole, account for over 80 percent of the domestic market there. Germany’s top three manage barely fifteen percent. The relatively profitable and stable retail market is firmly in the hands of state-affiliated savings and loan banks (Sparkassen) as well as cooperative Volks- and Raiffeisenbanken. Sparkassen alone take 40 percent of the domestic market.
Also, Germany is “overbanked.” There is a bank branch for every 2,500 citizens. In Sweden that figure is 5,000, and in the UK even 6,000. That keeps costs high and binds capital that would otherwise go toward investments such as foreign expansion or digitization.
Both German big banks share a fear of being taken over from abroad. Switzerland’s UBS is reportedly interested in Deutsche, while BNP Paribas and Italy’s Unicredit are believed to have Commerzbank in their sights.
The fates of Germany’s two big banks are not yet clear. Over the medium term a merger is very possible. A “Deutsche Commerzbank” would be number three on the European market while fulfilling the wish for a German national champion. Yet a foreign takeover, including a hostile one, cannot be ruled out given the lenders’ depressed share values.
For the historian Abelshauser there is only one way forward for Germany’s export-based economy: back to the roots, i.e. back to the business of financing corporations that leave their mark internationally.

Michael Balk is head of the business section of the daily Frankfurter Neue Presse

]]>Garage Goldhttp://jewish-voice-from-germany.de/cms/garage-gold/
Fri, 05 Oct 2018 13:00:46 +0000http://jewish-voice-from-germany.de/cms/?p=7730Vintage cars are a much sought-after secure investment. Here’s what it takes to make the right choices – in addition to a top-notch car mechanic…

In the wake of the global finance crisis, fine art and especially vintage cars have seen a remarkable increase in value – up to five or even ten percent per year. This comes as no surprise given that the market for artwork and vintage cars is governed by a highly limited and finite supply coupled with virtually unlimited capital availability. In addition to the investment aspect, many such investors tend to be vintage car enthusiasts or even hobbyists. This element also helps explain why this very interesting asset class can be unpredictable and difficult to assess. A vintage Aston Martin, Bugatti or Ferrari is generally regarded as a very secure investment. These brands enjoy legendary prestige, and prices for vintage sports cars have risen steadily over the last three decades.

However, many vintage cars are not secure investments. These include many pre-war vintage cars as well as the vintage Ford Mustang. At the major classic and vintage car auctions, such vehicles usually sell for well below their purchase price, if they sell at all. Investors who choose unwisely or base their purchases on faulty market projections are liable to incur a significant loss. Investors who do not wish to rely solely on their personal preferences or life experiences but who are seeking a safe and profitable investment are well advised to consult an expert who is knowledgeable about vintage vehicles and their price development. This, of course, must be coupled with careful asset-value management services. After all, two things are crucial for the long-term maintenance of this class of asset – top-notch asset management and a top-notch car mechanic!

]]>€ & $ – Close Friends?http://jewish-voice-from-germany.de/cms/e-close-friends/
Fri, 05 Oct 2018 12:55:40 +0000http://jewish-voice-from-germany.de/cms/?p=7691The EU is a heavyweight – but it must join forces and step up the cohesion of its economic area to compete with the US, argues Klaus D. Oehler….

Donald Trump has a clear goal: Make America great again. The US President repeats his election slogan tirelessly. But his often controversial and unusual methods and decisions are having an effect. The US economy is actually doing well, not least because of the tax cuts, but also because of protectionist measures Trump wants to enforce to boost domestic industry. Whether all this is necessary and how sustainable this turnaround will be – politicians and economists are arguing about it. The US President doesn’t seem to care much about critical voices. He prefers to refer to his balance sheet. And that’s something to be proud of: Only recently, online giant Amazon rose to become a company with a market capitalization of a trillion dollars. This makes it the only company in the world besides Apple that has ever reached this value. What the companies have in common, apart from their market power, is their network of customers, which – thanks to digitization – can be expanded almost infinitely. The European companies closest to the trillion dollar mark are SAP with 142 billion dollars and Royal Dutch Shell with 271 billion dollars, which makes it the most valuable European company. In order to give their economy a boost, according to experts recently quoted in the newspaper “Die Welt”, closer cooperation between the states in addition to facilitating market access is called for.

Differences in performance

It is equally difficult to predict how the relationship between the long-standing “close friends”, the US and Europe, will develop. Almost at the last minute, the President of the EU Commission, Jean-Claude Juncker, negotiated a compromise with Trump that averted punitive tariffs on German cars to be sold in the US. The outgoing convinced European Juncker is the one who sees more opportunity than risk for the European Union in the new relationship with Washington. In early September, in a much-noted speech before the European Parliament in Strasbourg, he presented his vision of a united Europe. The EU is a sovereign power that represents half a billion people and has enormous economic power, Juncker said. He added that nationalism had never solved problems.
This reference was important because a trend towards nationalist governments has increased in Europe in recent years. The first trigger was the euro crisis, in which both sides felt disadvantaged in the end by the measures taken in Brussels and the decisions taken by individual EU governments. Some felt patronized, others did not want to pay so much for the rescue of other states. Later, there was the refugee crisis, to which the governments also reacted differently; a common European solution could only be achieved in part. Juncker also admits all this: there is no convincing single foreign and security policy and even the monetary union is stagnating because of the all too great differences in economic performance. However, the heads of state and governments were able to agree on a banking union, a first step forward. The president of the EU Commission also made it clear that a country that wanted to leave the Union could not only benefit from the advantages a membership offers – a clear signal to London, where the Brexit is still controversial. Juncker’s proposals for reforming the EU envisage that majority decisions should make the EU more able to act in foreign and financial policy terms. Migration is to be managed efficiently with a mix of legalization and consistent repatriation. A new partnership with Africa – also to combat the causes of flight – should complement this. As a global currency, the euro should finally be brought into line with the US dollar.

US Secretary of Commerce, Wilbur RossU.S. federal government / Public Domain

Economists, however, regard this goal difficult to achieve. “Different regions do not have the same economic power, be it in terms of growth trends or innovative capacity; they also do not have the same political power, and that is the real challenge,” says Philippe Waechter, chief economist of an asset manager belonging to Natixis Investment. The international reference currency is the currency of the dominant political power. He recalls Japan having a strong economy in the eighties. “But its currency never competed with the dollar because of political weakness … And the same could be said of Europe, which does not manage to dictate strong political decisions in the long run,” says Waechter.
But it should now be clear to everyone involved that competition in the globalized world will be fought out primarily between three triads in the future: America, Asia with a strong China, and Europe. The Europeans, with their high export ratio, should above all be interested in strengthening the cohesion of their economic area. Many German industries, for example, now account for 60 to 80 percent of sales abroad – only free world trade can bring further growth in the long term.

Klaus D. Oehler is the financial editor at the daily Stuttgarter Zeitung

]]>Britain must stay in Europehttp://jewish-voice-from-germany.de/cms/britains-must-stay-in-europe/
Fri, 05 Oct 2018 12:39:43 +0000http://jewish-voice-from-germany.de/cms/?p=7695“This is a nightmare. We should not have listened to these charlatans…” Hard Brexit, Chequers Deal, No Deal – what does all this mean for the people of the United Kingdom? Travelling Britain, you get a clear picture of the fears of the consequences of leaving the EU, the disillusionment with Brexit and the strong wish to Remain. Especially in Northern Ireland. A personal appeal…

The tea is piping hot and strong, the cucumber sandwiches are delicious, the lawn green and rolling. A perfect English late summer afternoon. But the mood is sombre. Like everywhere on my short tour of the UK and Ireland we are talking about: Brexit.
“This is a nightmare. I voted out – but I am beginning to think that was a huge mistake,” muses Bob, a retired policeman. “We were misled. Right now, it does not look like the promises of ‘Leave to Take Control’ will ever come true. Quite the contrary. We should not have listened to these charlatans.”
Claire, who runs the admission department in a private school in Cambridge, makes sure “to get as many international kids in as we can – to keep up the cosmopolitan atmosphere that was always our school’s trade mark.” And indeed that of Britain! Brexit itself Claire deems nothing short of a “disaster. I was born on the ‘continent’ as it is called here,” she says with a smile, “but here in England I found the love of my life. We raised our family here. So far I have always had the best of both worlds.” The smile leaves Claire’s face. “Now, I just feel sad and disoriented.
I can’t believe what is happening.”

JVG

“To my horror, my parents voted Out,” says Michael, a GP from Manchester. “They thought Brexit won’t affect them and their lifestyle. But for certain it will affect the life of their children and grandchildren very much. I obviously failed to make that clear to them.” Michael’s wife, a nurse working with homeless people, is distraught: “We are already feeling the cuts in social spending. With Brexit, this will get much worse. How on earth are we going to look after our people?”

A rough ride

“To be honest, I didn’t vote at all,” says George, the cab driver. “Perhaps that was not a clever move but there you are.” Is he afraid of Brexit? “Well, the riding will be rough for a bit. Probably very rough. But then things will look up again. And as you know, when push comes to shove, we are a tough lot. We’ll pull through,” explains George as we head through the Belfast morning drizzle.
Not everybody in Northern Ireland shares George’s optimism. Apart from the list of withdrawn financial capital, non-valid driving licenses, a stop to the flow of goods and work, and so on … here we have the issue with the border to the Irish Republic. In Northern Ireland, where 56% voted “Remain”, this makes people uneasy. What will happen to the peace between Northern Ireland and the Irish Republic, which is only two decades young and by no means as stable as it might appear?
The recent assessment of a senior police officer in the Sunday Times that the forces are working 24/7 just to keep a lid on things is less than assuring. Will the old conflict, the old violence and hatred return?
Back to London. As a financial hub, the city is especially dependent on close ties with Europe. Here, the fear of a hard Brexit is especially great. Hence Mayor Sadiq Khan cooked up the idea of a second referendum. He is not the only one. And he is not the only one who says “that this is not a re-run of the referendum but the British people having a say for the first time on the outcome.” Bingo, Mr. Khan. Let’s give the Bobs and grandmas and grandpas and Georges a moment to re-think. And another vote to all those who were against Brexit in the first run: all the Claires and Michaels, the Olivers and Ingrids. All those who want to Remain.
And, above all, we are running out of time. A couple of months are a long time for child on a summer holiday. But a short time for grown ups in difficult negotiations. Hard Brexit, No Deal, Chequers Plan, Soft Brexit, Norway Model … Stop the muscle flexing. Stop drawing up one emergency plan after another. Stop the nightmare. Use common sense. All sides – Deal?

]]>Medical Technologyhttp://jewish-voice-from-germany.de/cms/medical-technology/
Thu, 05 Jul 2018 12:40:33 +0000http://jewish-voice-from-germany.de/cms/?p=7545Health care is a market with great potential – also for the investor. Yet finding the most promising investment opportunities is not an easy task…

Healthcare is a market with enormous potential – for service providers, industry, and last but not least, for investors. The world’s population is aging, and chronic diseases are growing ever more common. Industrialized countries are spending more and more on their healthcare systems and affluent patients are increasingly willing to invest in diagnosis and therapy.
At the same time, new developments such as genetic and stem cell technology, big data, artificial intelligence, and nanotechnology are expanding the possibilities of modern medicine beyond what we could have imagined only a few years ago. Technology companies such as Apple, Alphabet, and Amazon are now also joining in. Investors who wish to get on board with these developments may elect to invest in an ETF – one, for example, that tracks the MSCI World Health Care Index.
As is the case in most business sectors, however, direct investment in innovative companies is a more interesting option, particularly for more substantial investments. The medical technology sector is an attractive choice, in part because it is less risky than the pharmaceutical industry. A long-time engine of growth in the healthcare sector, medical technology is currently enjoying renewed momentum and dynamism due to the impact of digitalization. Apps, artificial intelligence, laser and sensor technology, mixed reality, and telemedicine are benefiting both physicians and patients, and are blurring the boundary between medicine and lifestyle trends.
But in the current gold rush, selecting the most promising investment opportunities from the wealth of startups isn’t easy. Demographic developments provide a solid and sustainable basis for the medical technology sector, and one which is relatively impervious to cyclical economic trends. However, health policy decisions could create – or eliminate – mass markets for specific therapies virtually overnight. Investors risk finding themselves sidelined. For this reason, individual investors would be well advised to seek expert advice from the fields of medicine, health industry, and health policy both before and during the investment process. ■